Low interest rates spur surge in refinancing

The mortgage market is being kept healthy by a jump in refinancing activity and a surge in first-home buyer inquiries.

Lendi co-founder and managing director David Hyman. Picture: Jane Dempster

The mortgage market is being kept healthy by a jump in refinancing activity, a surge in first-home buyer inquiries, and a rebound in those looking to buy property in six or more months, online broking house Lendi says.

Boss and co-founder David Hyman said his expectations that mortgage activity, particularly new purchases, would “fall off a cliff” during the COVID-19 turmoil had not eventuated.

“It’s actually been relatively resilient,” he said, noting record low interest rates that were not expected to move materially for some years were spurring demand. “The primary driver from our perspective is the interest rate. There has never been a better time to buy.”

Lendi, which is backed by ANZ and Macquarie Group, said data from its online mortgage broking platform showed a 58 per cent jump in the four weeks to mid-May in first-home buyer inquiries, compared to the pre-COVID-19 period of four weeks to mid-March.

The number of borrowers applying to refinance their mortgage climbed during the pandemic lockdown and remained 24 per cent higher in the four weeks to mid-May, versus the pre-COVID period.

Mr Hyman’s comments align with those of Aussie boss James Symond who earlier this month told The Australian the firm was tracking well during the pandemic, buoyed by a “significant spike” in activity largely around loan refinancing and borrowing for renovations.

He noted Aussie was seeing more overall mortgage business in recent weeks than the same time last year “by a clear margin”.

The official cash rate is at a historic low of 0.25 per cent, meaning many owner-occupied home loan rates sit between 2 per cent and 3 per cent.

The number of potential home loan customers indicating on the Lendi platform an intention to buy in six or more months have soared 50 per cent in four weeks to mid-May compared to the pre-COVID period.

Lendi — which some investors have valued at $500m — has also noticed the pandemic crisis is turning customers back toward the major banks.

In April, 50 per cent of its users were choosing a big four bank compared to an average of 20 per cent over the prior 12 months.

While Mr Hyman didn’t comment on specific lenders, he said some were grappling with loan time frames.

“Since mid-March, we’ve seen some variance in approval times across lenders … In some cases, approval times have blown out to as much as four weeks,” he said.

After starting in 2013, Lendi has 42 banks and lenders on its panel and has helped to settle loans of more than $10bn.

Lendi is 40 per cent owned by founders and employees, and its minority shareholders include ANZ, Macquarie, Bailador and sophisticated investors.

“Through careful business and capital planning as well as strong growth on the platform we have been able to continue investing in our people, and didn’t make any lay-offs during the COVID-19 crisis,” Mr Hyman said.

Start-up bank Xinja — which is yet to start lending — appears to be faring worse and has been the subject of media reports this week that it applied for the federal government’s JobKeeper subsidy. The Australian Prudential Regulation Authority wouldn’t comment on the situation on Tuesday.

Lendi’s latest fundraising round late last year raised $70m, above expectations for $35m-$50m.

The company doesn’t comment on whether it is profitable.

Before COVID-19, Lendi had been touted as an ASX listing candidate, and it has continued to keep options open and assess the capital markets outlook.

“It’s always a pathway we could take,” Mr Hyman said.

On the reform front, he is disappointed that Hayne royal commission-led reform to introduce a duty for brokers to act in customers’ best interests has been delayed six months until January.

“It is a very good thing for consumers. It’s actually a very solid competitive advantage that the broking industry will have,” Mr Hyman added, comparing the channel to customers going direct to banks.

The new open banking regime — which kicks off in a limited way in July — will assist customers in more easily sharing their data between providers.

Mr Hyman believes the regime is a positive move, although it will take time for consumers to adapt. “It is not going to be a step change overnight.”